Clients wishing to capital raise to carry out home improvements, fund education, pay for a wedding, go on that dream holiday or buy that new car is pretty much everyday stuff for many mortgage brokers.
If anything it just highlights the fact that people are busy getting on with their lives and trying to fulfil ambitions.
However, over the years I have come across a whole heap of unusual reasons why people who own property want to capital raise against the equity within their main home.
Some unusual reasons spring to mind such as capital raising to buy thousands of lottery tickets, high risk stocks and shares and the desire to trade in volatile sugar commodities, as well as one client who wanted to purchase a 600-year-old church.
By the way, the church project would not have been so bad if there was any hope of getting planning permission to convert it into a family home at some point. Instead the idea was to create a place for meditation in the middle of nowhere.
This rang alarm bells for me because it did not seem like a sound property investment because of the way previous planning applications had gone.
Although it has never stopped clients asking, capital raising for volatile investments, loss making business funding and of course paying off tax liabilities are frowned upon and mostly declined by mortgage lenders across the spectrum.
However, some clients do actually want to capital raise for interesting life events which can only be applauded.
George’s marvelous medicine
George, a global business strategist who owns a property in North West London came to me with a novel approach to capital raising purposes.
He wanted to switch lenders to get off the standard variable rate (SVR), secure into a fixed rate before Brexit happens while capital raising at the same time.
Nothing too much unusual in this but when I asked why he wanted to capital raise for £10,000 he explained that he planned to go to Hungary for cosmetic and restorative dental treatment.
George found a company called Hungarian Dental Travel which is part of the Hand-Picked Clinics Group who arranged to send him to a clinic in Budapest for the dental treatment.
His overall bill which was a shade under £10,000 covered his dental treatment in full as well as his flights and accommodation.
This is something that would cost him just under £28,000 with a dentist based in the UK. His treatment plan included extractions, titanium dental implants, bone grafting and bridges made from Zircon.
The latter part of the procedure is commonly known as the Hollywood smile. The dental surgeon who provided the treatment is considered to be one of the world’s best.
Understand the risk
I had a lengthy discussion with George and found out that he seriously considered a personal loan but the monthly payments were quite high because the loan had a term of just five years.
Specialist loans for medical treatment were another option but the interest rate was too high and the agent advised that these providers are quite selective who they lend money to which can be off-putting.
Instead he wanted to pay for his treatment over a longer period which is why he wanted to capital raise by way of a remortgage against his own property.
I explained the financial risk of what he was doing and he leaned towards the security of a fixed rate. He wanted the ability to make overpayments just in case he comes into some money in the short-term so he can pay off what he additionally borrowed as early as possible.
Get to know clients
As mortgage professionals we must look out for the best interests of our clients without interfering too much.
A fine balance must be achieved but in the case of George, I had nothing to worry about.
As I got to know George during the course of helping him with his mortgage I learned that he is quite savvy when it comes to money.
He saved 70% on his dental treatment by travelling to Hungary as opposed to seeking treatment here in the UK.
Unfortunately, some clients need us to look out for them a little more – as in the case of the lady who wanted to buy the church.
I later discovered that she was a vulnerable person and as her mortgage adviser I acted in her best interests.
I am sure most mortgage brokers out there have a tale or two to tell.